Will Iraq quit OPEC? Iraq's position in the Organisation of Petroleum Exporting Countries (OPEC) is in the balance following the American take over of the country.

Author:Blanche, Ed
Position:Current Affairs

The US conquest and occupation of Iraq has given the Americans control of one of the world's major oil producers, a country many believe has untapped reserves that could rival Saudi Arabia and Russia. US control could also weaken the grip of OPEC on world markets and, in particular, Saudi Arabia, the cartel's dominant member. So, as the Americans help restore Iraq's oil industry, badly run down by 13 years of UN sanctions, the key question is: Will Iraq remain in OPEC now it has resumed oil exports, albeit at a modest level, after the UN Security Council unshackled it from 13 years of sanctions?

The Americans have long sought to weaken OPEC, which has been under growing pressure from non-cartel producers, particularly Russia, which is currently vying with Saudi Arabia for dominance of the world oil market. This struggle must also be seen as part of a wider battle for political influence in the Gulf.

There are divisions within OPEC itself, particularly over the cartel's quota system, designed to keep prices at or above $25 a barrel. Algeria, Nigeria and some of the other members are demanding larger shares of OPEC's production total, which would have to be at Saudi Arabia's expense.

Philip J. Carroll, the US executive chosen by the Pentagon to advise Iraq's post-war Oil Ministry, has suggested Iraq might be best served by disregarding OPEC production quotas, the strongest indication so far that the Americans might push Iraq's new government into breaking ranks with the cartel. It also reinforces the widely held belief that the major imperative behind the US invasion of Iraq was to control its vast oil resources, thus reducing US reliance on Saudi Arabia for energy supplies. It did not go unoticed by the international community that the Americans seized the oil ministry headquarters in Baghdad and put it under guard as soon as they stormed the Iraqi capital--which was more than they did for other important buildings.

As it is, the return of Iraq--which has operated outside OPEC since the 1990 invasion of Kuwait--as a major exporter under a new government would expose OPEC to considerable uncertainty. Iraq has the second largest proven oil reserves in the world after Saudi Arabia--around 113bn barrels--and its return to the market unconstrained by the cartel could further erode OPEC's already limited ability to set prices. It might even trigger a price war that would weaken the Saudis and other cartel members. That would, of course, delight...

To continue reading